If the Cost Method Is Used to Account for an Investment

question 88

Multiple Choice

If the cost method is used to account for an investment in common stock, dividends received should be

• A) credited to the Stock Investments account.
• B) credited to the Dividend Revenue account.
• C) debited to the Stock Investments account.
• D) recorded only when 20% or more of the stock is owned.

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Definitions:

Donee Beneficiary

A third party who benefits from a contract made between two other parties, primarily in contexts like insurance or gifts.

Third-Party

An individual or group besides the two primarily involved in a contract or transaction.

Parol Evidence Rule

A legal principle that prevents parties from presenting extrinsic evidence that contradicts or adds to the written terms of a contract.

Exceptions

Specific conditions or circumstances that alter or nullify the general rule or application of a law.